Market conditions

[Car32]

Originally Posted by MARTIN1264

It's Frustrating and Humiliating at the same time....I've said before, I love the Rolex brand but I really can't stand the new practices that they have implemented....The only reason I stay the course with Rolex is the retained value( money in the bank mostly).....But it takes the joy out of buying a watch. It's more of a Business transaction... and that's very sad.

The new practice is what’s going to ensure the watch retains value.

[Cru Jones]

This "grand conspiracy" makes far less sense than supply simply outpacing demand.

No one is spending over 10k on a watch they don't want just because they can't source an SS Sub or GMT.

Rolex, AP and Patek have been go-to brands for decades. Today, many people want watches, and the average consumer is more educated as to what they want (Rolex, AP and Patek). And at these inflated prices, they won't compromise or "risk" their money on other brands.

[mementomori1983]

The most measured take I've seen so far. Great article.

[gttime]

Originally Posted by MARTIN1264

It's Frustrating and Humiliating at the same time....I've said before, I love the Rolex brand but I really can't stand the new practices that they have implemented....The only reason I stay the course with Rolex is the retained value( money in the bank mostly).....But it takes the joy out of buying a watch. It's more of a Business transaction... and that's very sad.

This exactly! I’ll be honest I paid 10% premium for my SD43 but it was stickered from DavidSW and I don’t regret it a bit. Just can’t make a habit out of it.

[superdog]

Great article.

Still want a Pepsi.

[jon_jon]

Great article.

The manufacturer sacrifices short-term profits to increase demand by selling less watches. The local ADs can sell these popular watches at full retail rather than discounting. But the pre-owned watch retailers (or individual flippers) can quickly buy and sell these watches at a decent profit margin. The current situation probably benefits the pre-owned watch retailers the most.

[IPVillain]

Nice post, thanks.


Sent from my iPhone using Tapatalk

[TudorTuesday]

Thanks for posting - I woke up to a notification a out this article, read it, and was just about to post it myself.

The discussion about "perceived rarity" vs "inherent quality" is the crux of the article to me. Regardless of whether or not manufacturers are savvy enough to play the scarcity game in their favor (and I'm among those who believe they absolutely are), there are many buyers who only know whether something is "exclusive." That alone will drive perceived value for many in the market... And limited supply is why many (most?) luxury brands are so successful.

We see it on TRF when people get all virtiolic about Grand Seiko, or even Tudor. Inherent quality is much harder to grok, compared to exclusivity or perceived brand value. It's interesting psychology for sure, and well described in that article.

[yannis]

It does not say anything new but a good sum up of the situation nonetheless. Rolex is doing the right thing. It is tough not being able to get what you want, when you want it and it is even tougher if you have no established relationship with an AD. Some do get rude too. But in the light of "self-preservation" and "marketing" their products Rolex are in the right direction.

[MTBer]

I think Rolex is in a unique position in that they’re far away the most widely recognized luxury watch manufacturer and often perceived by the general public as THE highest end watch brand bar none. So, they’re almost a victim of their own success in that such ubiquity could become a detriment to the brand perception they’ve cultivated so well. With increased wealth in the population, demand for Rolex has risen to where money is no longer enough of a barrier to entry at current prices.

Rolex could increase MSRP across the board to the point where demand meets whatever numbers they feel is strategically optimal, but such a move could gut the perceived value of the brand. When I purchased my Seamaster ten years ago, the feel of the bracelet was a strong factor in picking it over the then-current Sub date- with the machined clasp and new co-axial movement, I felt I was getting an arguably better watch at half the price. Attempting to move upmarket via price increase without upgrading the products would invariably draw unfavorable comparisons to those higher end brands. If Rolex were to move upmarket, I’m guessing buyers at that level would want to see what they’re paying for with display casebacks showing off highly decorated movements...something Rolex just doesn’t do. Instead, it’s probably easier for them to retain the level of exclusivity they want by creating a different barrier of entry that they control entirely- availability.

[Atone]

"Let's say, for instance, you are a Rolex retailer and have 10 customers that have paid down payments for the new Rolex GMT-Master II in steel with the "Pepsi" ceramic bezel."

I have never heard of Rolex taking deposits. plus, this article is pretty elementary in the "psychology" it's proposing.

[chad362wiley]

well written summary of forums threads over the past 8 months

[jon_jon]

Originally Posted by Atone

"Let's say, for instance, you are a Rolex retailer and have 10 customers that have paid down payments for the new Rolex GMT-Master II in steel with the "Pepsi" ceramic bezel."

I have never heard of Rolex taking deposits. plus, this article is pretty elementary in the "psychology" it's proposing.

You are correct in that Rolex doesn't take deposits. But there are certainly many Rolex ADs (aka "Rolex retailer") taking deposits and we have had tons of threads here on members putting down deposit at ADs for the 116500 and other watches with long wait-lists.

[GED]

OP-excellent and insightful article-thanks for the link to it!

Originally Posted by Fleetlord

This was an excellent article and it was the first I have seen to detail what is really happening.

Prior to last year, Rolex was just too available. Stores were stocked to the brim with almost everything (except Daytona -C). Even the "harder" watches BLNR and JC SDDS were just an order and a month away....

The grey market had pricing for new Sub Dates @ over 20% off! Unacceptable. The brand was in danger of losing its caché as it was being defined by SS sport watches that were ubiquitous and being sold at discount pricing. That is not good for a "luxury" brand and like it or not, that is what Rolex is.

So it was time for Rolex to clean things up and that is just what they have done.

By distributing less, they have increased SALES. Just because the case was full of watches didn't mean they were selling all of them. Now the FOMO is driving people to pull the trigger on watches they would be "meh" on if it was available all the time ( the Hulk comes to mind)....

The only thing I think Rolex really needs to do is to change it's merchandising displays to accommodate the lower distribution. As case full of empty slots looks bad from a retail perspective. If they had merchandisers with far less slots it would add even more to the exclusivity story.

I'm happy Rolex took this direction. This is why Rolex will never become Breitling or Hublot...etc Overproduced, overpriced and of diminishing value. Rolex will make the tough short term actions to endure the integrity of the brand. That is fine by me.

Fleetlord-excellent and insightful post.

[skiahh]

This isn't a new concept, nor are Rolex, PP or AP the ones to discover it. Porsche has been doing this for quite some time, for example, as have others.

It's also not confined to luxury brands, but the domain of those brands savvy enough to create themselves into a lifestyle brand. Look, for example, at Harley Davidson. For many years you'd have to pay homage to your local dealer, put down a deposit and wait for a bike to show up so that you could pay over MSRP for said bike... which was, at the time, typically of lesser quality than other brands out there. But those other brands didn't have the whole lifestyle.

Look at Apple. While they don't appear to limit their supply in any way, they have also created a hype around a product that isn't inherently better or more advanced than others (and, in fact, it's less so in many ways), yet people are willing to pay Apple lots more for phones, laptops and other devices than they could pay from the "other" OS guys.

It is, indeed, all about the marketing and creating that hype. But you can't do it if you haven't created that lifestyle foundation that makes people want to buy into the lifestyle you are portraying.

[Atone]

Originally Posted by jon_jon

You are correct in that Rolex doesn't take deposits. But there are certainly many Rolex ADs (aka "Rolex retailer") taking deposits and we have had tons of threads here on members putting down deposit at ADs for the 116500 and other watches with long wait-lists.

ah, good to know. hadn't heard that

[subtona]

Good read.

[chloebear]

Originally Posted by Fleetlord

This was an excellent article and it was the first I have seen to detail what is really happening.

Prior to last year, Rolex was just too available. Stores were stocked to the brim with almost everything (except Daytona -C). Even the "harder" watches BLNR and JC SDDS were just an order and a month away....

The grey market had pricing for new Sub Dates @ over 20% off! Unacceptable. The brand was in danger of losing its caché as it was being defined by SS sport watches that were ubiquitous and being sold at discount pricing. That is not good for a "luxury" brand and like it or not, that is what Rolex is.

So it was time for Rolex to clean things up and that is just what they have done.

By distributing less, they have increased SALES. Just because the case was full of watches didn't mean they were selling all of them. Now the FOMO is driving people to pull the trigger on watches they would be "meh" on if it was available all the time ( the Hulk comes to mind)....

The only thing I think Rolex really needs to do is to change it's merchandising displays to accommodate the lower distribution. As case full of empty slots looks bad from a retail perspective. If they had merchandisers with far less slots it would add even more to the exclusivity story.

I'm happy Rolex took this direction. This is why Rolex will never become Breitling or Hublot...etc Overproduced, overpriced and of diminishing value. Rolex will make the tough short term actions to endure the integrity of the brand. That is fine by me.

I fully agree with you...Great points. They were too readily available before which led to greater discounting. Good when you are trying to get into the brand, but bad when you are already in. But overall, too readily available is not a good thing. Great take.

[The Libertine]

Good (and relevant) article - thanks for sharing.

[Wiener48]

Interesting story, thanks

[burnsniper]

I don't think Rolex is artificially limiting supply - rather they have adjusted supply to more realistically reflect demand. While the difference may seem subtle, it is a much smarter and traditional business strategy. Instead of watches just sitting and gathering dust (like several years ago) stock is down across the board reducing carring costs for ADs and Rolex while enabling everyone to maintain high margins.

The downside to this is grey market dealers are speculating and sucking up any excess stock across wide areas which artificially inflates demand (which actually helps Rolex as they are still moving watches while helping create buzz around their products being "hot"). This is a risky play for greys if they properly account for costs, insurance, and risk many mark ups are not actually that high. A shift in the overall economy or a slight bump in supply by Rolex can cause this all to crash to halt. However, Rolex doesn't want to rock this boat as they are sitting pretty and they know that their product is differentiated enough that customers aren't going to run to another brand.

[jonnyz1245]

Originally Posted by Atone

"

plus, this article is pretty elementary in the "psychology" it's proposing.

while you may think its elementary, it scarcity marketing 101. And it works very well in luxury goods. In watches we are seeing Patek, AP, and now Rolex do it. Hermes is another classic example of this kind of marketing. There are many others. When you tell people they can't have something, they want it more. Works every time. Not on everyone but on enough where the numbers matter

[Speed]

Originally Posted by ~JJ

Interesting article from A Blog to Watch https://www.ablogtowatch.com/why-som...ssible-retail/

What did you find most interesting about the article?

[KarlFr]

this is why I buy vintage rlx

[LINVS]

"...it is our distinct belief (based on plenty of evidence) that some of the more clever (and independently owned) watch companies are going to be increasingly limiting supply of high-demand sport watches in order to increase demand. "

This is what many of us figured out already. The SS Sports shortage isn't because of the Chinese or folks making money in the rising stock market. But Rolex is intentionally with holding supply to drive demand.



"...Because of unrealistic demands for growth, luxury watch brands produced more watches than consumers were actually willing to buy (at any price)."

So, Rolex is doing this to correct over growth and a glut of watches. The glut of watches is apparent as buyers have been accustomed to big (sometimes in excess of 20%) discounts.

I've noted that all of these "limited availability" watches are all available on the grey market. Anyone of us could have a Hunk, SD43, or White dial Daytona on our wrist tomorrow if we have the cash. But, that's hard to stomach after years of expecting a discount.

The glut of watches makes sense. The greys buy lots of watches (DJs) as long as some of those limited watches are included. For example, a grey dealer might agree to take 25 Datejusts off the hands of an AD just as long as a couple Subs and a Daytona are included. The ADs must cycle their stock otherwise they'll lose their AD status.

So bottom line, the "shortage" is due to massive "unmoved" stock.

[AK797]

Everyone is brave on the eve of battle...

[Aventura]

Originally Posted by peterpl

I didn't mind the article either and I agree with him regarding paying over list of a
timepiece. Never would I do it.

On principal alone I wouldn't do it. Personally it just makes me feel as though I've been ripped and wouldn't add to the experience of purchasing a luxury item.

I agree completely with Ariel when he says I want a brand to "want" my business instead of me begging and overpaying for a "luxury" item. (not in those exact words)

Excellent comment It can not be that they try to manipulate us to get more money. If no one would pay surcharge everything if it fixes it. And if the factory does not want to deliver more watches, it's things of them. That they do not do it. I see that there are many people frustrated and it is very easy for them to go to other brands. There is a part that says: "Imagine a retailer informing you that in order to purchase a luxury steel watch at retail price you need to spend a certain amount of money on the brand or at the store before you are eligible to do so."
That's crazy ... and gives me the reason to what I always said ... there are thousands of Rolex watches from previous models that can not sell and want people to turn to them. CRAZY !!

[Sarosh]

Good interesting read! However still doesn’t solve the problem for the individual who has saved for many months, possibly years to buy the one rolex he has wanted since so long. They can’t just walk into an AD and enjoy the moment they’ve been waiting for. Sullies the experience abit, no?

Doesn’t matter I guess, people will still wait and for those who can’t, they’ll go grey. Either way, the Crown wins...

[AK797]

This is a good line - A big part of this is because rarity is easier to perceive than inherent quality when trying to determine overall product value. Ie Money talks loudest.

However he's got things the wrong way around as usual, demand outpaced supply in 16 and globally in 17 due to a number of obvious factors, and then finally supply was manipulated to control flippers recently, and supply apart from on the D500 and new Basels were released as they always were until this year.

Without a Union or Collective Bargaining the consumer has no power to insist on retail, this is a capitalist market in extremis and in this Watch Prohibition most people who want things will have to pay for them, no point crying over spilt retail in this market, that was a previous era now dead.

[cc75]

Thanks. Very interesting.